First-Time Home Buyer Incentive

What is the first-time home buyer incentive?

As of  October 2019, the first-time home buyer incentive is a program by Canada Mortgage and Housing Corp (CMHC) that provides an interest-free loan to qualified first-time home buyers who wish to top up their down payment amount. On average, eligible home buyers save $2,500.00 on CMHC Premiums, and save $75.00 per month on their payment.

How does the incentive work?

The first-time home buyer incentive program provides up to 5% of the purchase price of a home to eligible buyers in the form of an interest-free loan. This is up to 10% for new construction homes.

However, there are certain criteria for when it has to be repaid and who can qualify for the incentive.

Who can qualify for the incentive?

There are four main criteria for qualifying for the first-time home buyer incentive.

1. The borrower’s qualifying household income must be less than $120,000. 
2. The borrower must be a first-time home buyer
3. The borrower must already have at least 5% saved as a down payment.
   (Gifted down payments may be eligible.)
4. The borrower is only eligible to borrow less than four times their qualifying income

While the loan is interest free, it’s a shared equity loan. That means the loan amount will fluctuate based on the home’s value because the government, in sharing the equity in the home, is essentially a part owner. 

Through the program, the government will loan a home buyer 5% of the purchase price for a resale home or 10% for a new home.  The buyer has to repay the loan either when they sell their home or after 25 years, whichever comes first. However, they don’t make ongoing payments on the loan nor do they pay interest.

They do, however, have to pay back the percentage borrowed (5% or 10%) of the value of the home at the time of sale. That means they will pay more than they borrowed if the home has increased in value over the term of the loan (and less if the home depreciated). We recommend this Incentive program to all eligible home buyers, and to call 754-7607 to see if it is right for you and to determine eligibility.